PLR 200034023: Late S corporation election allowed after filing mix-up

Plain-English summary

A corporation intended to elect S corporation status from its incorporation date, but no Form 2553 was filed on time. Its sole shareholder said the omission arose from a misunderstanding between the accounting firm and the incorporation agency about who would file the form. The IRS found reasonable cause under section 1362(b)(5) and allowed the election for the first tax year if the corporation filed a completed Form 2553 within 60 days of the ruling letter. The IRS did not decide whether the corporation otherwise qualified as a small business corporation under section 1361(b).

Ruling snapshot

• Question: Could a missed S corporation election be treated as timely filed?
• Outcome: Approved if Form 2553 was filed within 60 days of the letter.
• Key authorities: IRC §§ 1361(b), 1362(a), 1362(b)(5).

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Index Number: 1362.01-03 Washington, DC 20224

Number: 200034023
Person to Contact:
Release Date: 8/25/2000
Telephone Number:

Refer Reply To:
CC:DOM:P&SI:2 - PLR-107986-00
Date:
May 30, 2000
X =

A =

D1 =

Year 1 =

Dear
:

This letter responds to a letter dated February 7, 2000, and subsequent correspondence submitted on behalf of X, requesting a ruling under § 1362(b)(5) of the Internal Revenue Code.

The information submitted states that X was incorporated on D1 of Year 1. A, the president and sole shareholder of X, represents that X was intended to be an S corporation from the date of incorporation. However, due to a misunderstanding between X’s accounting firm and the agency responsible for the incorporation of X as to who was responsible for filing a Form 2553, Election by a Small Business Corporation, for X, no Form 2553 was timely filed for X.
Section 1362(b)(5) of the Code provides that if -- (A) an election under § 1362(a) is made for any taxable year after the date prescribed by § 1362(b) for making such election for such taxable year or no such election is made for any taxable year, and (B) the Secretary determines that there was reasonable cause for the failure to timely make such election, the Secretary may treat such an election as timely made for such taxable year.

Based solely on the facts and the representations submitted, we conclude that X has established reasonable cause for failing to make a timely election to be an S corporation for X’s Year 1 taxable year. Accordingly, provided that X makes an election to be an S corporation by filing a completed Form 2553 with the appropriate service center effective for its Year 1 taxable year, within 60 days following the date of this letter, then such

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election will be treated as timely made for X’s Year 1 taxable year. A copy of this letter should be attached to the Form 2553.

Except as specifically set forth above, no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the Code, including whether X was or is a small business corporation under § 1361(b) of the Code.

This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.

Pursuant to a power of attorney on file with this office, a copy of this letter is being forwarded to X’s authorized representative.

Sincerely yours,

H. GRACE KIM
Assistant to the Chief
Branch 2
Office of the Assistant
Chief Counsel
(Passthroughs and
Special Industries)

Enclosures: 2
Copy of this letter
Copy for § 6110 purposes